VZCZCXRO3817
OO RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #2350/01 3241126
ZNR UUUUU ZZH
O 201126Z NOV 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8658
INFO RHEHAAA/WHITE HOUSE WASHDC IMMEDIATE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 04 NEW DELHI 002350 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
DEPT PASS TO USTR MDELANEY/CLILIENFELD/AADLER 
TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
USDA PASS FAS/OCRA/RADLER/BEAN/FERUS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD ECPS BEXP TRGY TINT BG NP
IN 
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
November 16-20, 2009 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of November 16-20, 2009, including the 
following: 
 
-- India Ready for FATF Evaluation 
-- Disinvestment Gets a Push 
-- Commerce Minister Plans to Double India's Share in Global Trade 
Within the Next Five Years 
-- ICT Working Group Meets in Washington 
-- Skype in India 
-- DOE Visits India 
-- Volunteer Visitor Program Alum Launches Successful CSR Program 
 
India Ready for FATF Evaluation 
------------------------------- 
 
¶2. (SBU) In a meeting with Econoffs to discuss the annual 
International Narcotics Control Strategy Report, Department of 
Revenue Director Priya Singh said the GOI is ready for its upcoming 
Financial Action Task Force (FATF) mutual evaluation and has 
prepared itself well in complying with the 16 key and core FATF 
recommendations.  Singh said the GOI used the preparations for the 
mutual evaluation as an opportunity to self-assess and a way to 
coordinate useful information that has been sitting in different 
government agencies.  Her only concern was how the FATF evaluators 
would understand the slow Indian judicial system, which is the cause 
for the lack of convictions on anti-money laundering activities 
despite the increase in cases brought to the court system.  She 
expects 2005 cases to lead to the first convictions in 2010.  Singh 
also noted two areas for improvement: government outreach to 
domestic non-profit organizations that do not receive foreign 
funding; and increasing regional work as India has more to offer and 
can learn from its neighbors.  For example, she mentioned the 
possibility of providing technical assistance to Bangladesh and 
Nepal in setting up and operating financial intelligence units. 
 
Disinvestment Gets a Push 
------------------------- 
 
¶3. (SBU) Although not released officially by the Ministry of 
Finance, the Cabinet Committee on Economic Affairs (CCEA) announced 
that the government will reduce its ownership in all profitable 
public sector enterprises (PSEs) currently listed on a stock 
exchange so that the government owns no more than 90 percent of any 
listed PSE.  If implemented, this would affect 12 profitable PSEs in 
which the government ownership currently exceeds 90 percent.  In an 
earlier meeting, Ministry of Finance Department of Disinvestment 
Joint Secretary Sidhartha Pradhan told Econoff that listed PSEs that 
are in line for disinvestment by March 31, 2010 include Engineers 
India Limited, National Thermal Power Corporation, Cochin Shipyard, 
Rural Electrification Corporation, National Mineral Development 
Corporation, Satluj Jal Vidyut Nigam, Hindustan Copper Limited, 
Minerals and Metal Trading Corporation, and Telecommunications 
Consultants India. 
 
¶4. (U) The CCEA also indicated that all unlisted PSEs that have been 
profitable for the past three years, have no accumulated losses, and 
have a positive net worth are required to list at least 10 percent 
of shares on stock exchanges.  One hundred PSEs would currently meet 
these requirements and be subject to possible listing in the future. 
 
 
¶5. (U) Based on current market prices, the GOI would raise 
approximately $5.9 billion, if it reduced its ownership to 90 
percent in the 12 affected PSEs.  The GOI recently amended the rules 
so that disinvestment proceeds for the next three years can be used 
for development and social sector spending.  Pradhan said that 
disinvestment proceeds would be used to reduce the fiscal deficit in 
addition to paying for capital expenditures.  Prior to the rule 
change, disinvestment proceeds were placed in the National 
Investment Fund (NIF), which in turn invested in domestic stocks, 
bonds, and mutual funds.  Although the GOI could not touch the 
principle of the NIF, 75 percent of the income earned was used for 
social sector programs that promote education, health, employment 
 
NEW DELHI 00002350  002 OF 004 
 
 
and 25 percent was used for capital investment projects of 
profitable PSEs. 
 
¶6. (SBU) The CCEA announcement did not include a timeline or target 
date for the PSEs to comply with the decision, but the timing will 
likely be governed by market conditions.  Mr. Pradhan told Econoff 
that he is not expecting any problems with the disinvestment plans 
as the left-leaning parties in the governing coalition have "no veto 
power" as they did in the previous government.  Pradhan said 
coalition partners prior to the April/May election were not 
interested even in selling profitable PSEs but today see benefits, 
mainly because they realize the amount of revenue they can raise as 
listed PSEs' stock values have significantly risen on the Bombay 
Stock Exchange. (Note:  Disinvestment stalled in the previous 
Congress Party-led government due to opposition by leftist parties. 
The government raised approximately $1.7 billion from privatization 
from 2004-2009, significantly less than the over $5 billion raised 
during the BJP-led government's five year term from 1999-2004. 
Coalition partners such as West Bengal's Trinamool Congress and 
Tamil Nadu's DMK have opposed disinvestment in profitable PSEs in 
the past. DMK had threatened to pull out of the previous 
Congress-led coalition government over the disinvestment of the 
profitable PSE Neyveli Lignite Corporation.  End Note.) 
 
Commerce Minister Plans to Double 
India's Share in Global Trade Within 
the Next Five Years 
------------------------------------- 
 
¶7. (U) On November 12, Commerce Minister Anand Sharma informed the 
Parliamentary Consultative Committee on Commerce and Industry that 
his Ministry intends to double India's share in global trade of 
goods and services within the next five years.  He noted that 
India's share in world trade of goods and services rose from 0.9 
percent to 1.6 percent from 2003-08.  To reach 3.2 percent by 2014, 
Minister Sharma indicated that his Ministry hopes to achieve annual 
export growth of 15 percent in 2010-11 and 25 percent in 2012-14. 
(Note: This target is much more ambitious than that announced in 
August with India's Foreign Trade Policy 2009-14, which targeted 
2020 for doubling of India's share in global trade. End note.) 
Minister Sharma explained that while the impact of the global 
recession is still continuing, the GOI's export stimulus packages 
have now started bearing fruit.  Government incentives to 
labor-intensive industries had resulted in a revival of the 
manufacturing sector, he added.  Minister Sharma pointed to the 
recent uptick in exports in sectors that had been affected by the 
recession, such as gems and jewelry, pharmaceutical, and some 
agricultural products.  He further outlined his plan to sustain 
export growth through creating a more conducive policy environment, 
including fiscal incentives, institutional changes, procedural 
rationalization, efforts to enhance market access across the world, 
and diversification of export markets. 
 
¶8. (U) The Committee members raised the issue of the Goods and 
Services Tax (GST) and its implementation, along with their desire 
for continuation of income tax breaks for exporters, the impact of 
exchange rate fluctuations on exporters, the need to improve 
infrastructure facilities, WTO related issues, and the impact of 
India-ASEAN Free Trade Agreement (FTA).  The members suggested that 
the Commerce and Industry Ministry assess job losses due to the 
continuing downturn, particularly for gems and jewelry producers in 
Surat and textile producers in Tirupur, to consider further 
incentives for job creation.  Some Committee members stressed that 
the current export promotion schemes, which are set for two years, 
should be extended for at least five years to ensure stability and 
sustained growth.  Minister Sharma said that the India-ASEAN FTA 
will provide India with greater market access to the Southeast Asian 
countries, and that a successful conclusion of WTO Doha negotiations 
is very important.  He also informed the attendees that the GOI has 
formed a committee to recommend specific trade facilitation 
measures, but provided no further information. 
 
ICT Working Group Meets in Washington 
------------------------------------- 
 
NEW DELHI 00002350  003 OF 004 
 
 
 
¶9. (SBU) The U.S. - India Information, Communication and Technology 
Wrking Group (ICTWG) met in Washington, D.C. on November 4-5.  The 
U.S. side was led by Ambassador Philip Verveer and the Indian side 
by Special Secretary R. Chandrashekhar, Ministry of Communications 
and Information Technology.  Key issues were addressed during this 
meeting and broad areas of cooperation and partnership were 
identified making it a very successful and productive dialogue, 
especially in the areas of cyber security and encryption.  GOI 
officials also gained from their interaction with the USG and 
industry representatives on wireless spectrum auctions and broadband 
deployment.  US industry raised issues related to customs valuation 
and poor treatment of US companies by local customs officials, 
advocated for pro-growth economic policies in the ICT domain, and 
advocated for an increased role for the private sector in 
strengthening the bilateral relationship.  The next meeting of the 
working group is likely to be held in Hyderabad India in May 2010 in 
conjunction with the ITU-D conference. 
 
Skype in India 
-------------- 
 
¶10. (SBU) Econoffs met with Skype representatives who have been 
meeting with the GOI officials in response to the unsubstantiated 
news report that the GOI is planning on shutting down Skype calls 
from India. Skype offers free software which enables users 
peer-to-peer voice over internet protocol (P2P VOIP), which has 
raised security concerns in India especially after the November 26 
attacks.  Skype intends to educate various officials within the 
government and dispel doubts about the service.  In upcoming weeks, 
Skype will be developing and revising their strategy for operations 
in India.  Econoffs offered assistance to Skype in reaching out to 
government officials. 
 
DOE Visits India 
---------------- 
 
¶11. (U) In advance of Secretary Chu's visit, DOE PDAS Jonathan 
Elkind visited India to present ideas on the Clean Energy Research 
and Deployment Initiative (CERDI).  Elkin met with various 
ministries as well as the Planning Commission and helped DOE 
circulate the concept non-paper prior to the visit.  The non-paper 
was well received by government officials and will provide an 
outline for a cooperative agreement for the Prime Minister's visit 
to the United States. 
 
Volunteer Visitor Program Alum 
Launches Successful CSR Program 
-------------------------------- 
 
¶12. (U) PVR Nest, the Corporate Social Responsibility (CSR) arm of 
PVR Ltd. (a leading multiplex cinema company in India) partnered 
with Moser Baer (one of India's top information technology and 
optical media companies) to form CineArt, a program that combines 
art and cinema for social change.  Over a period of five months, 
children who participated in CineArt developed skills in art and 
filming.  On November 12, the eve of Children's Day, PVR Nest and 
Moser Baer held CineArt's Grand Finale.  CineArt's participants 
screened their films during the event and New Delhi Chief Minister 
Sheila Dikshit unveiled the CineArt 2010 Diary, which showcased the 
work of the program's young artists.  In her speech, Dikshit 
emphasized the role of meaningful entertainment in life and the 
importance of creative outlets, especially for children.  Children 
from twenty schools across the Delhi NCR region participated in 
CineArt and attended the Grand Finale. 
 
¶13. (U) Deepa Menon, Head of PVR Nest and the creative force behind 
CineArt, recently participated in a Volunteer Visitor CSR Study Tour 
(October 26 to November 3).  PVR Nest's CSR initiatives primarily 
benefit disadvantaged children and the environment.  In addition to 
CineArt, other PVR Nest CSR programs include Childscapes, PVR Ki 
Paathshala, School Life, and Green Films. 
 
¶14. (U) Visit New Delhi's Classified Website: 
 
NEW DELHI 00002350  004 OF 004 
 
 
http://www.state.sgov/p/sa/newdelhi. 
 
 
WHITE